Arsene Wenger is facing a defining summer at Arsenal, with the club planning to entrust him with their largest ever transfer budget regardless of whether they secure Champions League qualification.

Saturday's FA Cup defeat against Blackburn prompted an outpouring of anger from the Arsenal crowd but the club's faith in Wenger and their strategy is unshaken, even if they do go another season without silverware and fail to finish in the top four.

Around £70m will be available for squad strengthening this summer, with Arsenal specifically targeting "three or four" players, including a world-class striker to fill the void that has been left by Robin van Persie.

Wenger's contract, however, expires in 2014, leaving Arsenal facing a potentially momentous decision over their most successful manager at some stage in the next year.

Momentum

Both Wenger and Arsenal would surely accept that the steady downward momentum of recent seasons must be reversed for the partnership to continue into another contract.

An immediate opportunity is provided by tomorrow's Champions League tie against Bayern Munich, with Wenger planning as many as six changes from the team that lost to Blackburn.

Wenger believes that his main job ahead of tomorrow will be to rebuild the players' damaged confidence and admitted that their collective mentality has become a significant problem.

Saturday was the first time that Arsenal had lost in the FA Cup to lower league opposition since Wenger's arrival in 1996. It follows the humiliation of being knocked out of the League Cup by Bradford earlier this season.

"It is vital for the end of our season that we respond in a strong way," said Wenger. "First you have to rebuild the confidence because we are not playing against Blackburn on Tuesday. We play Bayern Munich, so a lot of confidence will be needed.

"We have a great team but we still have to show more maturity on the mental front. We have to understand what it means to win big games.

"The top level is about consistency in every single game. Mentally, we are not capable at the moment of preparing in exactly the same way for every game.

"Maybe they still thought 'Okay, we're playing at home against Blackburn, it will be difficult but we will win the game anyway'. It doesn't work like that."

Arsenal will publish their half-yearly accounts in the next fortnight, with the club expected to post sizeable profits due to the summer sales of Van Persie and Alex Song.

Their running costs, however, remain virtually at break-even due to the size of a wage-bill that is the fourth highest in the Premier League.

Arsenal, though, do have an estimated cash balance of more than £150m, although much of this is for running costs and contingencies.

This will be further boosted by the new Emirates shirt sponsorship deal, which is front-loaded, and a kit deal that is expected to be agreed imminently, probably with Nike or Adidas.

Arsenal's spending power would inevitably be affected if they lost the annual revenue of between £20m and £40m for the Champions League, although the club do not specifically budget for this in their business plan and this would not affect their existing cash reserves.

Wenger, who said that the players were "angry and hurt" after Saturday's defeat, does believe that he has the core of a squad that can challenge the two Manchester clubs for the Premier League title in future seasons if he can add proven quality in selected positions.

His plan is to supplement his group of young British players, such as Jack Wilshere, Theo Walcott, Alex Oxlade-Chamberlain, Kieran Gibbs and Aaron Ramsey, with more players of a similar status to Lukas Podolski and Santi Cazorla.

Having tried to sign David Villa and Etienne Capoue in January, Arsenal's only addition was Nacho Monreal at left-back.

Wenger's thinking was that it was better to keep the money for the summer if his targets were not available. There will be huge pressure on Wenger, however, to attract major signings this summer. Capoue remains a target but he is now likely to target younger strikers than Villa, with Fiorentina's Stevan Jovetic being regularly watched.

Goalkeeper and right-back are other areas that are being specifically scouted. Bacary Sagna is increasingly likely to leave this summer, while Wojciech Szczesny is now playing for his future as Arsenal's first-choice goalkeeper. There is a growing sense that Szczesny could benefit from more experience alongside him and a spell out of the first-team, with Wenger interested in Pepe Reina, Victor Valdes and Asmir Begovic.

Saturday's defeat against Blackburn also posed questions about the depth of his squad and it is expected that Sagna, Podolski, Cazorla, Wilshere, Walcott and Ramsey will all return to the starting team against Bayern tomorrow.

Arsenal captain Thomas Vermaelen said the "terrible" FA Cup result was because the side "didn't respect the game sometimes".

He is adamant, though, that the Champions League does still represent a realistic chance of a trophy this season. "Anything can happen in the Champions League – we saw that last year with Chelsea – I believe in our chances," he said .